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OECD opens BEPS tax effort to all countries

The Organisation for Economic Cooperation and Development (OECD) will allow any country to join its base erosion profit shifting (BEPS) project if it agrees to adopt minimum standards and pay an annual fee.24 Feb 2016

The OECD has proposed a new framework that would allow any country or jurisdiction to join its "efforts to update international tax rules for the 21st century", it said.

A forum will be set up as an extension of the OECD's Committee on fiscal Affairs, and interested countries will be allowed to join this as 'BEPS associates'. The associates will work with the OECD and G20 members on setting final standards under the BEPS project and reviewing and monitoring the implementation of BEPS.

The BEPS project aims to close the gaps in existing international rules that allow corporate profits to 'disappear' or to be artificially shifted to low or no tax environments, where companies have little or no economic activity.

"Revenue losses from BEPS are conservatively estimated at $100-240 billion annually, or 4% to 10% of global corporate income tax (CIT) revenues. Given developing countries’ greater reliance on CIT revenues, the impact of BEPS on these countries is particularly damaging," the OECD said.

OECD secretary-general Angel Gurría said: "Drawing on the G20’s leadership, countries worldwide are working closer than ever to shut down the loopholes that facilitate tax avoidance, The plan we are presenting today will create the largest and most inclusive forum for discussions and decisions on implementing the BEPS measures and ensuring a stronger and fairer international tax system. It is another strong signal that behaviour which was considered both legal and normal in the past will no longer be accepted."

The framework’s mandate will focus on the review of implementation of the four BEPS minimum standards, in the areas of harmful tax practices, tax treaty abuse, country-by-country reporting requirements for transfer pricing and improvements in cross-border tax dispute resolution, the OECD said.

This is a very positive development, said tax expert Heather Self of Pinsent Masons, the law firm behind Out-Law.com.

"Developing countries have, rightly, been concerned that they would not be fully included in the BEPS process. The OECD has responded over recent months by extending a welcome to these countries to participate, and is now going further with this initiative. I think it is positive for corporates too – one of our biggest fears is that BEPS could lead to a significant expansion in cross-border disputes, so it is important that efforts to improve processes for dispute resolution cover as many countries as possible," Self said.

The proposal will be presented to G20 finance ministers next week in Shanghai, the OECD said.